What makes you different from similar investment syndicates and VC funds?
Walled City Co. is generally sector-agnostic, which allows us to focus on the quality of the deal rather than having to source a deal that fits in with our existing portfolio. Most often, our target companies are not advertising that they are raising capital and this provides us exposure to a unique set of investible companies.
By investing in companies with minimal cash-burn and preferably those that are cash-flow positive, we reduce the risk of failure when compared with similar stage investors. Moreover, we work closely with our investee companies to further reduce our risk and help them to their next stage of growth for a Series-A investment within the next 1-2 years, where we exit some or all of our equity. We use our strategic experience and network to position these companies, so as to be attractive for the next stage of growth capital.
What is your exit strategy?
Walled City Co.’s investments are exited in two parts. An initial partial exit through secondary sale of shares at a Series-A mark, when the market price has been set by a sizeable new investor. At this point, we expect partial cash distribution, while the remaining position may be exited in private sale under specific circumstances for each of the investee company. As an investment advisor, we encourage our investors to maintain a careful balance between opting for early exists and maximizing their potential future returns.
As Walled City Co. prefers investing in revenue generating and cash neutral companies, this means our time horizon for realization is much shorter than more traditional seed VC. This allows us greater control over liquidity timelines. In our experience we expect first distributions to within the first-three years.
What is your outlook on the current investment environment?
Current economic indications reflect an economic downturn on the horizon. Historically, such a downturn can translate to new opportunities and may carve out to be vintage years for capital investments. We see the first half of this decade being no different, especially for syndicates at the starting line of their investments journey. New investments are able to capture these defining moments in such economic times, such as those caused by global lockdowns, a new way of life, shift towards working-from-home, offline to online, and a new last mile delivery world. Walled City Co.’s current portfolio shows our commitment to this new world order, and with these strategic investments we feel we are entering this blue ocean of immense opportunities available.
How are the syndicates structured?
For each investment, the syndicates decide to create an SPV (special purpose vehicles) either domiciled in-country or off-shore as per private preference of the investors and the investee companies. We can facilitate the process via our network at a small fees for the syndicate investment manager.
What is your investment criteria?
Running a low cash-burn business, preferably cash-flow positive
Post revenue with an ARR of between $50k-$1m
Cleaner cap table with founder held equity
Fast-moving business and technology roadmap to Series-A growth within 1-2 years
Why do you insist on revenue before investing?
Seed stage companies are usually in the process of identifying who their customer is and what they demand of their product. With a new team where internal dynamics are still unexplored, searching for the right business compass is a very high risk investment and we believe post-revenue companies, or at-least those with a customer base have a much better opportunity to scale.
How do you source your target investments?
Our target companies are quite hard to find and they are usually not at demo days or pitching competitions. To maintain a high quality deal flow, we have built strong relationships with leading technology incubators, coworking spaces, university placement departments, and leading lawyers & accountants in the ecosystem.
What sectors does Walled City Co. invest in?
We focus on quality deals and are not specifically sectors specific. With that in mind, we prefer to back the best of the best in each vertical.
Do you only take straight equity stakes in your target companies?
Our preferred route to investment is straight equity, however, we also work with convertibles and SAFEs where necessary.
How many companies do you expect to have in your portfolio?
We expect to have 10 investee companies in our portfolio by the end of 2021 and you can expect us to add 2 new companies every year to our portfolio for the next 3-4 years.
In which countries are you active?
We are currently focused on Pakistan and all of our current investments are business with Pakistani founders. That said, we do envision a future where we may invest in the regional companies, if the appropriate opportunity materializes.
Do you ever co-invest?
Ideally, we want to be the first investor in a company, but we greatly value strategic investors joining the round. A few of our leading portfolio companies have co-investors with us from the Seed stage, all the way to Series-A and B.
What is the vision and mission of Walled City Co.?
Walled City Co. is an investment syndicate for seed and early-stage start-ups & entrepreneurs, we focus on long-term value by partnering with knowledgeable, innovative & passionate founding teams leveraging technology for Pakistan-centric market opportunities. We provide resources to these startups, for them to dream big and realize those dreams by enabling them with the capital needed, and our extended network of angels, advisors, board members & champions, who help steer them to the next steps of progress, adding value to the economy and building large valuable enterprises in the process. For the syndicates, we act as a bridge to connect them to startups, providing them an opportunity to invest and diversify their portfolio by giving them access to top investible deals.
How far do we go to access top deals to invest in?
For angel and investment syndicate, the foremost challenge is creating a pipeline of investible startups. To overcome this challenge, we have partnered with universities, incubators, accelerators, business consultants, lawyers, accountants, successful entrepreneurs, who have access to up & coming founders and founding teams at such startups.
We ensure presence and attendance at all technology conferences, events and sessions to reach out to such individuals as this industry is fairly young in Pakistan and no formal platforms currently provide such a service.
How do we get investable startup the attention from the right people?
Once we have incoming deal-flow, we put together an advisory board to evaluate these deals and quickly identify those who we can work with and maintain a close relationship with them to provide them mentorship, access to our network and financial support at the right time. In order to do this work, we also bring in from time to time, subject matter experts to facilitate this deal-flow and evaluate the aspiring startups. From our experience, we know this is the key to solving this puzzle.
What makes Walled City Co. stand out?
1. Quality of the deal-flow.
2. Our Network of Subject Matter Experts, Advisors, Board Members.
3. Available Capital for Investing.
In all 3 of these, we work on solving the challenges at the same time. It is quite important to align these elements such that when a quality deal is available, our team of experts are in position to diligently review them, and funds are made available to immediately deploy and invest.
What challenges do investors face today?
Over time, we have observed the quantity & quality of deal-flow has improved quite a lot, and our ability to put together the subject matter experts has also improved, yet the number of investments per year is still at a low number partly because of changing external conditions, such as the improving situation of access to capital for startups; thereby creating a new challenge investors have not faced before.
Which Industries do we focus on?
Walled City Co. is generally sector-agnostic, which allows us to focus on the quality of the deal rather than having to source a deal that fits in with our existing portfolio. With that in mind, we prefer to back the best of the best in each vertical.
Does the investor pick the deal they invest in?
Yes the investors pick the deal and invest at their own discretion. We do not manage the investment, however we can facilitate the process via our network at a small fees for the syndicate investment manager.
What do I commit to as an investor?
You are under no obligation to invest in any deals. However, you are committing to keeping any information you receive private and confidential.